A Money-Saving Shipping Strategy

Let’s face it: shipping is a tough beast to tackle. There are scores of methods, carriers, and policies to wade through to craft a proper shipping protocol, and choosing between them all can be daunting. “With the way the industry is going, there’s a lot of changing costs on a regular basis,” says Karen D’Andrea, director at shipping and small business solutions company Pitney Bowes. The most efficient and cost effective shipping policy varies from business to business, but if you remain mindful of your overall goals, you can ship your merchandise at a fraction of the cost.

Here are some tips from Inc. 500|5000 companies, logistics consultants and shipping experts, that will ensure your business’s shipments get the most bang for your buck.

Location, Location LocationIt may seem simple, but where your company is located can have an impact on how much time and money can be saved on shipping. Most large-scale carriers have hubs stationed across the country, usually next to major airports, and businesses that are closer to those hubs are able to cash in on discounted shipping rates and later pick-up times.

Large-scale printing company Mimeo depends on their companies’ locations, particularly one near the Fed-Ex hub in Memphis, to complete complex orders for next-day delivery. Their pick-up time is much later than competitors, allowing for later deadlines to be met without a premium cost. “Our very late pick up time allows our customers to place an order as late as 9 p.m. central time to be delivered next morning,” says Tom Rose, Mimeo’s senior international trade and regulatory specialist.

When deciding on a carrier or two to contract with, go local first. If a particular option has a nearby hub, there is a greater chance that contracting with them will give your company a lower base rate during negotiations for shipping costs due to the short pick-up distance and a later time.

“If you have the volume, you can work with the carrier in terms of discounts,” Rose says.

Forecast Your OptionsIn order to capture a deal on shipping, a company must know just what they’re trying to ship. Whether it’s boxes of pamphlets by airmail or ground shipping direct to consumer, anticipating how often you will be shipping is key in saving money.

Online shoe and clothing retailer Zappos.com is known for its jaw-dropping free shipping both ways, and cost-effective 2-day and overnight shipping options, but that doesn’t come cheap. The company has been able to elevate their shipping policy by understanding just how much output they have and hunt for the deal from there. Sean Kim, director of business development at Zappos, recommends putting it all down on paper.

“Put together a forecast for how many packages you are planning on shipping for the next 12 months, estimate your cost per package, and calculate your total cost for the 12 month period,” Kim says, “If it's difficult to swallow, consider putting together a phased plan to eventually get you to your goal.”

In understanding your output, you can negotiate with carriers to lower your prices for shipping and progress towards your goal rate. If shipping is a “wow factor” like Zappos is, then that savings can be passed directly to your clients for the added draw of free shipping.

Know Your Cargo’s TripWhen it comes to delivering the package to the customer, businesses have so many options: traditional ground, freight and air are staples, but boat and trucks (in both full-truckload and less-than-truckload varieties) can also be viable options. They can all get you to the same place, but have different caveats.

Coyote Logistics, the fastest growing logistics company according to our 2010 Inc. 500 list, is well in-demand by companies small and large across the country. Coyote’s team of logistics consultants optimizes supply chains and shipping strategy, among other services, to make sure a business is operating at its best. Coyote Logistics’ chief strategy and marketing officer Chris Pickett says that when selecting options, there are five factors to consider: the size and value of a package, the total trip of the package, the door-to-door lead-time, special handling requirements and relative cost.

As a rule of thumb, ground shipping is much cheaper than air, but requires a longer lead-time to ensure the package makes it in a reasonable timeframe. However, shipping costs lie in other areas beyond what transportation is used. According to Pickett, these indirect costs include cargo damage claims, detention expenses if a package takes too long to load and unload, and can rack up hundreds of dollars in tacked-on expense.

“The damage that can be done with a single shipment going bad can dwarf the $150 you thought you saved by going with what seemed like the cheapest shipping option,” Pickett says.

Understand every detail of your shipment before you hand it off to a carrier, and note if there’s any cargo insurance or outstanding risks in the way of the destination. If a cheaper option presents itself with an independent carrier, these details are even more critical. If it’s a crucial shipment that could have serious impact on your business, it is possible to obtain an audit of a shipping company’s practices, available through a larger company like Coyote Logistics or through smaller businesses that deal solely in this practice, which will list the shipper’s reliability rate and likelihood to cause damage. The more you know, the more you’ll save.

Do Your Own PaperworkOne crucial aspect of shipping is the time, money, and effort involved in acquiring supplementary materials. Postage, permits and visas ensure the postage is travelling legally, both domestically and internationally, but it could also be a silent cost that makes a dent in the already tenuous shipping budget. The timeliest and least expensive way to deal with these necessary extras is by doing as much paperwork as possible in-house.

The simplest way to cut cost in supplemental materials is to tackle the main component of shipping: postage. Connecticut-based shipping and business solutions company Pitney Bowes has service suites dedicated to in-house postage production, which can save up to 20 percent per year on shipping costs. “Based on the market today, it really helps for small businesses to have some kind of shipping system available,” D’Andrea says.

Postage meters are also rated by volume efficiency, which means that businesses can select the proper meter to cope with their shipping policy. In addition to hardware, Pitney Bowes also offers shipping software options from cloud-based package tracking to complete logistics suites. This software, which many shipping-heavy consumers build by hand, keeps all packages in order and can also read out the cost of optioning to use a different carrier, less-than-truckload, or special freight without the need for a specific carrier contract. All of Pitney Bowes’ software is scalable, allowing smaller businesses to use the option without paying as much as the larger clients. “There really is a type of system that would work with any type of shipper now,” D’Andrea says, “So smaller shippers can really get that solution that helps them manage their operation better.”

However paperwork is more than just postage. When shipping internationally, it’s also important to stay watchful of the rogue paperwork that accompanies shipping out of the US. The more knowledgeable you are with an international shipment’s customs forms and tariffs, the less likely it is that the shipment will waste time and money locked up in customs. Rose works with a courier that includes customs forms and regulations along with the shipping for Mimeo’s international orders. “We also ship it so that everything is prepaid, so we don’t have to bother the recipient to pay for duties and taxes,” Rose added.

Keeping a clear head about paperwork ensures that nothing keeps your shipment from reaching the customer, saving enormous amounts of both time and money.